Vanguard Gets Serious About Fee-Only Advisors

Monday, March 12, 2012 08:59
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Vanguard Gets Serious About Fee-Only Advisors

Tags: ETFs | mutual funds

The giant in the no-load mutual fund world has always been at best a distant friend of even fee-driven advisors, but now Vanguard wants to change that dynamic.

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Vanguard now admits that its direct sales approach traditionally went straight to the investor and bypassed the advisor entirely.

 

As a result, advisors had to go out of their way select Vanguard funds for client portfolios, usually because the fees were simply among the lowest the industry has ever seen.

 

Now, Vanguard is doubling its advisor sales force to become more of a traditional wholesaler, especially where its ETFs are concerned.

 

Given the razor-thin margins on these indexed products, Vanguard needs massive scale in order to make a decent business here.

 

However, competition for asset flows has been fierce, so the company is pursuing every possible channel to ensure that, for example, VWO keeps up with rival funds like EEM.

 

At the moment, barely 15% of Vanguard's $1.75 trillion in AUM is in actively advised accounts.

 

Awareness is coming around, but it might be tough to break advisors of the habit that Vanguard is another planet.

 

And as for the commission-based advisors? No real chance of drumming up interest there.

 

 

 

Comments (2)

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brentb843
'As a result, advisors had to go out of their way select Vanguard funds for client portfolios, usually because the fees were simply among the lowest the industry has ever seen.'

What does the above mean Scott?
brentb843 , March 13, 2012
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ScottMartin
That's one ugly sentence! Let's start with adding "to" before "select."

Over the years I've had advisors tell me that Vanguard's for do-it-yourself investors only and that they felt a little transgressive bringing the funds into client portfolios. Others were neurotic about showing a client a Vanguard-heavy portfolio "full of funds they could pick themselves."

Anyway, point is there was little love lost between the Bogle Faithful and the advisory community. Whether Vanguard changes that at this late date with this outreach program, who knows.

Clearer?
ScottMartin , March 13, 2012

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